Strong fundamentals underpin healthy European road freight expansion
Ti’s 2018 European Road Freight Market shows a market gradually slowing from 2017’s peak, although one in which growth remains solid. At 2.9% in real terms, the market expanded at its second quickest rate since 2010, showing resilience to a number of headwinds in the wider European economy. Of some concern however will be 2019’s expected growth, which shows a further slowing in the year ahead.
acroeconomic fundamentals explain the slowdown. Following robust 2.4% GDP growth in 2017, the European economy slowed down in 2018 and seems set to cool further in 2019. According to the European Commission economic performance indicators, the EU saw GDP growth of 1.9% in 2018 and is expected to fall further to 1.5% in 2019.
OECD data shows EU manufacturing growth fell from 3.1% in 2017 to 1.3% in 2018, as the region’s retail sales growth also cooled to a 2.1% expansion. Perhaps ominously, Eurostat data showed the volume of retail sales fell 1.6% month-on-month in December 2018, a fall comparable to May 2011 when the Eurozone was hit by the government debt and banking crises.
Underlying growth in several road freight cost elements saw prices rise in 2018, however, with nominal growth exceeding 5% for the year. According to Eurostat, quarterly road freight price increases were the fastest seen since mid-2011. In 2018, the service producer price index across the EU increased by 2.6% compared to the previous year. This was driven in part by Diesel prices which grew in line with the pick-up in oil prices, as well as by steady wage growth which resulted in driver wages ending 2018 2.0% than in 2017, according to CNR data. Rising tolls across several European countries, including Germany, France, Hungary and Belgium, have also pushed up trucking’s cost base.
European Road Freight Market Size – 2018-2023 CAGR
While 2019 is expected to see a continuation of the slowdown in the European road freight market, the 2.5% CAGR forecast over the five years to 2023 is more positive, highlighting that while the market will continue to face a number of wider economic challenges, the underlying fundamentals are good and will be supportive of expansion over the medium-term. The market should see a steady rise in demand for goods as household spending power increases and production capacity and productivity expand. Volume growth in the short-to-medium term will be dependent on these macroeconomic fundamentals which, importantly, suggest solid in growth rates of both domestic and international road freight transport. The main beneficiaries are likely to be market in Central & Eastern Europe, where downside risks from any slowdown in major trading partners will likely be limited by rising domestic demand and wage growth in tight labour markets.
Source: Transport Intelligence